09:31 AM EDT, 07/09/2024 (MT Newswires) -- A bank's board of directors should take primary responsibility for oversight of third-party services and ensure the implementation of a framework to manage the risk of outages and disruptions to customer services by third-party service providers, the Basel Committee proposed Tuesday.

The committee of global banking regulators said it published a consultative document Tuesday proposing 12 principles to guide banks and supervisors on managing risks from third-party arrangements with the aim of enhancing banks' ability to withstand operational disruptions.

All documentation evidencing key decisions relating to third-party arrangements should be in banks' records, the committee said in its consultation paper.

"Ongoing digitalization has led to rapid adoption of innovative approaches in the banking sector," the committee said. "As a result, banks have become increasingly reliant on third parties for services that they had not previously undertaken."

Outsourcing cloud companies such as Microsoft ( MSFT ) , Google ( GOOG ) and Amazon ( AMZN ) to run key customer services has been an increasingly popular practice among major banks.

While the practice can help banks mitigate certain operational risks, it should "neither diminish banks' responsibility to fulfil their obligations to stakeholders nor impede regulatory oversight," the Basel Committee said.

The committee said comments on the proposed principles would be accepted by Oct. 9.

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